About the Internet Society 

Board of Trustees

Audit Committee

Audit Committee Charter

Last Revision: 24 July 2009

The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of The Internet Society (ISOC) has the oversight responsibilities, duties and authority described in this Charter.

Purpose

The primary purpose of the Committee is to assist the Board in fulfilling its responsibility to oversee:

• the integrity of ISOC’s financial statements and other financial information provided by ISOC to regulatory agencies, lenders, rating agencies and other stakeholders;
• ISOC’s retention of independent auditors, including oversight of their performance, qualifications and independence as well as the terms of their engagement; and
• ISOC’s financial reporting process and internal control systems.

The Committee’s purpose also is to provide an avenue for communication among ISOC’s independent auditors, management and the Board.

The Committee’s responsibility is one of oversight, as management is responsible for ISOC’s financial reporting, internal controls and disclosure systems and for preparing ISOC’s financial statements and the independent auditors are responsible for auditing those financial statements. The independent auditors report directly to the Committee and are accountable to the Committee and to the Board with respect to the audit of ISOC’s financial statements.

Composition

The Committee shall have at least three members who are also members of the ISOC Board. The Board shall designate one of the ISOC Members as the Chair of the Committee. A majority of members of the Committee must be "independent" and also must be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement. A Committee member is “independent” if (i) the member is not an officer, employee, or affiliate of ISOC or its subsidiaries or affiliates, (ii) the member does not have a relationship, which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a member of the Committee, and (iii) the member does not receive or accept, directly or indirectly, any consulting, advisory or other compensatory fee from ISOC or its subsidiaries or affiliates (even for de minimus amounts), except for that which is incident to serving on the Board or the Committee.

Meetings

The Committee shall meet two times per year and shall hold such additional meetings as the Chair of the Committee deems necessary. Meetings may be held in person or by telephone at the discretion of the Chair of the Committee. The Committee shall meet periodically with ISOC’s Chief Financial Officer, independent auditors, legal counsel, and investment advisors as necessary to enable the Committee to perform its responsibilities and duties and to discuss any matters that the Committee or any of these persons or firms believes should be discussed. The Committee may, at its discretion, meet in executive session with or without the presence of one or both of the independent auditors or management.

Responsibilities and Duties

The following shall be the principal recurring duties of the Committee in carrying out its oversight responsibility. These duties are intended as a guide, with the understanding that the Committee may modify or supplement them as appropriate.

Independent Auditors

1. Appoint and oversee ISOC’s independent auditors. Review the performance and audit fee arrangements of the independent auditors at least annually.
2. Review and approve any non-audit services performed for ISOC and its subsidiaries and affiliates by ISOC’s independent auditors.
3. Require that the independent auditors prepare and deliver at least annually a formal written statement delineating all relationships between the independent auditors and ISOC, which shall include all matters set forth in Independence Standards Board, Standard No. 1, Independence Discussions with Audit Committees.
4. Discuss with the independent auditors any relationships or services disclosed in the independent auditors’ statement that could affect their objectivity and independence and take any action in response thereto necessary to satisfy the Committee as to the independent auditors’ independence.
5. Obtain and review at least annually a report by the independent auditors describing: (a) the auditing firm’s internal quality-control procedures, (b) any issues material to ISOC’s audit raised (i) by the most recent internal quality-control review or peer review of the independent auditors or (ii) by any inquiry or investigation by governmental or professional authorities, (c) any steps taken by the independent auditors to deal with any such issues, and (d) all relationships between the independent auditors and ISOC.
6. Obtain from the independent auditors assurance that their audit of ISOC’s financial statements was conducted in accordance with auditing standards generally accepted in the United States.
7. Obtain and review a timely report from the independent auditors describing
   1. all critical accounting policies and practices to be used by ISOC
   2. all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management officials of ISOC, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors
   3. other material written communications between the independent auditors and management of ISOC, such as any management letter or schedule of unadjusted differences, and
   4. any illegal acts that have been detected or have otherwise come to the attention of the independent auditors in the course of their audit. The financial statements of the Internet Society are prepared on a combined basis with the financial statements of Public Interest Registry, in which the Internet Society is the sole member. Therefore, the Audit Committee of the Internet Society will rely on the independent audit of Public Interest Registry, and the review of that independent audit by the Board of Directors and/or Audit Committee of Public Interest Registry. The independent auditors of Public Interest Registry may or may not be the same as the independent auditors used by the Internet Society.

Financial Statements, Controls and Reports

8. Obtain, review and approve, if applicable, a timely analysis from management about any significant proposed changes to ISOC’s accounting principles, policies, estimates, internal controls, disclosure controls, procedures, practices or auditing plans (including those policies for which management is required to exercise discretion or judgment).
9. Review any disclosures made to the Committee by ISOC’s President, Chief Financial Officer, or Director of Finance about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in ISOC’s system of internal financial controls.
10. Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communications with Audit Committees.
11. Periodically discuss with each of the independent auditors, without management being present, (a) their judgments about the quality, appropriateness, and acceptability of ISOC’s accounting principles and financial disclosure practices, as applied in its financial reporting, and (b) the completeness and accuracy of ISOC’s financial statements.
12. Review and discuss with management disclosures to rating agencies, ISOC’s results of operations, other historical financial information or projections of future financial performance, including the appropriateness of any “non-GAAP financial measures” or “pro forma” or “adjusted” financial information to be contained therein.
13. Meet as necessary with management and the independent auditors to:
    • review the annual audit plans, including the adequacy of staffing, budgeting and audit fees;
    • iscuss any significant matters arising from any audit, report or communication relating to ISOC’s financial statements, including any material audit problems, disagreements or difficulties and responses thereto by management;
    • discuss the significant judgments made and alternatives considered in ISOC’s financial reporting, including the appropriateness of the alternatives ultimately chosen;
    • discuss policies with respect to significant risks and exposures and the steps taken to assess, monitor and manage such risks and exposures; and
    • discuss any significant changes in accounting rules or standards as promulgated by any regulatory authority that could have a significant effect on ISOC’s financial statements.
14. Review with ISOC’s legal counsel any legal matters that could have a significant effect on ISOC’s financial statements and ISOC’s compliance with applicable laws and regulations, as well as any inquiries received from regulatory or governmental agencies.
15. Oversee ISOC’s timely completion and submission of compliance audit reports to funding sources.
16. Review with management any significant “off-balance sheet” transactions, arrangements or obligations including any significant arrangements with ISOC’s affiliate PIR.
17. Review any decision by management to seek a second opinion from a public accounting firm other than ISOC’s regular independent auditors regarding any significant accounting issue.

Reporting and Recommendations

18. Maintain minutes or other records of meetings and activities of the Committee.
19. Report the Committee’s activities to the Board on a regular basis and make such recommendations with respect to the above as the Committee or the Board may deem necessary or appropriate.

Other Responsibilities

20. Review and provide approval of any material “related party” transactions or arrangements between ISOC and any of its directors or officers or any of their respective affiliates, associates or related parties.
21. Review the Annual Disclosure Forms submitted in accordance with the Internet Society's Conflict of Interest Policy.  Report the results of this review to the Board of Trustees at least annually.
22. Take such other actions as the Committee or the Board may deem necessary or appropriate.

Authority and Resources

The Committee shall have the necessary authority and resources to discharge its oversight responsibilities and duties. This shall include the authority to retain special counsel and other experts (including experts in accounting or auditing) or consultants and to engage separate auditors to conduct special audits, reviews or other procedures, all as the Committee deems appropriate. ISOC shall provide for appropriate funds as determined by the Committee for the payment of the fees and expenses of any such counsel, experts, consultants or separate auditors, as well as all ordinary, administrative costs incurred by the Committee and its individual members that are necessary and appropriate in performing their duties.

Annual Review

The Committee shall review, on at least an annual basis:

1. this Charter and the scope of the responsibilities and duties of this Committee, and
2. the Committee’s performance of its responsibilities and duties as set forth in this Charter.

The Committee shall refer to the Board for appropriate action any proposed changes to this Charter.

Operating Procedures

Formal action to be taken by the Committee shall be by unanimous written consent or by vote of a majority of the persons present (in person or by conference telephone) at a Committee meeting at which a quorum is present. A quorum shall consist of at least one-half of the members of the Committee.

Availability of Charter

This Charter shall be made available to stakeholders, lenders, regulatory agencies, and rating agencies upon request.